Bulletin: TX2017008

Date:
November 22, 2017
To:
All Texas Issuing Offices
RE:
UNDERWRITING - Searching Names After Austin v. Coface Seguro De Credito Mexico, et al

Dear Associates:

WHAT YOU SHOULD KNOW: 

A name search should include a search of ALL surnames and aliases of a party shown on any and all documents reviewed by a title company, including documents of record as well as unrecorded documents or forms of identification.

BACKGROUND:

The Texas Supreme Court recently refused to review an Appellate Court Decision in the above-referenced lawsuit. The case involved whether searching just one surname of a party is reasonable when the title company has constructive knowledge that more than one surname exists. This specific case concerned the Hispanic naming convention which normally uses both the paternal and maternal last name. [For example: Javier Ernesto Suarez y Menendez. However, frequently documents are executed only using one of the last names Javier Ernesto Suarez or Javier Ernesto Menendez.] 

  • A recorded abstract of judgment included the debtor’s full name, which has two surnames similar to the example shown above.  
  • The abstract was indexed by the second surname.
  • Debtor later sold Texas property to a third party buyer. The warranty deed included only the first surname of the seller/debtor. 
  • The abstractor ran a name search of only that surname. The bank argued there was constructive notice of the debtor’s full name due to filings in the chain of title of a Notice of Lis Pendens, and a Release of the Notice of Lis Pendens since both documents included the debtor’s full name. 
  • The debtor/seller provided his passport as identification for closing the transaction which included his full name.  
  • The Court ruled that buyer had constructive notice not only in the chain of title but had notice beyond the chain of title because they were presented with his full name for identification purposes. The Court held that the buyer purchased the property subject to a perfected lien. 

The court pointed to Texas Property Code Ann. §13.002(a): “An instrument that is properly recorded in the proper county is… notice to all persons of the existence of the instrument.” Id. at §13.004. “A recorded lis pendens is notice to the world of its contents.” The case also quotes from the Noble case, 340 S.W.3d at 76: “Every purchaser of land is charged with knowledge of all facts appearing in the chain of title through which he claims that would place a reasonably prudent person on inquiry as to the rights of other parties in the property conveyed.” The court did not address the issue of whether a release of a notice of lis pendens when the case is dismissed continues to provide notice of a controversy.

WHAT YOU SHOULD DO:

  • Examiners must be prudent when reviewing chains of titles with more than one surname (especially Hispanic or Portuguese names) to be certain that all names are searched.  
  • The escrow officer should require a name search on any additional surnames if provided with identification that provides a variation of the name or a complete full name than the name is in the chain of title. 
  • A best practice would be to inquire as to whether the party has any other surnames, including maiden names if appropriate, or aliases. 
  • If a lis pendens is found in the public record, even if the case is dismissed, consider requiring that the defendant file a motion to expunge lis pendens under Sec. 12.0071 Property Code and obtain an order expunging the lis pendens. Sec. 12.0071 (f) provides that when a certified copy of the order of expunction is recorded, it no longer constitutes constructive or actual notice, or creates a duty of inquiry or affects the rights of a third party purchaser.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None